New California Law Governing Commercial Co-Ventures Now (Partly) In Effect
Consumers increasingly want to feel good about their buying decisions and like-minded companies often look for ways to communicate how they align with consumers through “cause marketing” campaigns. One popular type of campaign – commonly called a “commercial co-venture” or “CCV” campaign – involves a for-profit company advertising that a portion of a purchase will benefit a charity.
As we discussed in this podcast, about half of the states regulate CCV campaigns. The regulations typically fall into one or more of the following categories: (a) requirements for agreements; (b) advertising disclosures; (c) financial accounting; and (d) registration with the states. A new California law that became effective this month will impose new requirements on “Charitable Fundraising Platforms,” which include certain CCV campaigns, but the most burdensome provisions have been delayed until next year.
Historically, California has not required companies that run CCV campaigns to register with the state as long as they: (a) have a signed agreement with the charity governing the campaign; (b) transfer the required funds to the charity on a rolling 90-day basis; and (c) provide the charity with an accounting with each payment to confirm that the company has complied with the representations it made to the public. The new law doesn’t change that.
However, under the new law, a company will have to register as a Charitable Fundraising Platform if: (a) the campaign is conducted at least in part online; (b) the campaign is directed towards individuals in California; and (c) the donations benefit six or more charitable organizations per calendar year. In addition to registration, companies would be required to complete specific reporting requirements at the end of every calendar year.
Although the Act became effective on January 1, 2023, California has delayed the registration and other reporting requirements until January 1, 2024, while it finalizes the regulations to implement the law. Note that some other provisions – including (a) a requirement to ensure a charity is in good standing, (b) a prohibition on misusing charitable funds, and (c) a requirement to make certain disclosures – are currently in effect.
We’ll keep you posted as things develop.